Buyer Frequently Asked Questions
1. Do I have to pay a deposit when I make an offer to purchase a house?
The deposit is usually between $5000 and $10,000; this goes towards the cost of the house. The deposit cheque is cashed within 48 hrs of the offer being accepted, even if it is a conditional offer. Therefore, you need to have this money available when you make an offer.
2. What conditions should be included in the offer?
All offers should be conditional on mortgage and inspection. The mortgage condition gives you a week to 10 days to arrange a mortgage. The mortgage company will verify the value of the property. I advise you to be pre-approved with your bank for the mortgage. If you cannot get the mortgage your deposit is returned to you without penalty.
The inspection will cost approximately $400. The inspector will check all the systems in the house including plumbing, furnace, electrical, structure and foundation. They will give you a report on the current condition of the house so you can decide if you want to go ahead with purchasing the house. If you are not satisfied with the current condition of the house you do not have to go through with purchasing the house and you will get your deposit back in full. I can recommend good inspectors and mortgage advisors to you.
3. Do I have to obtain insurance for the house?
Yes the house will need to be insured as a prerequisite of getting the mortgage. I will make sure you are aware of any insurance concerns that the house might have.
4. Should I be pre-approved for a mortgage?
One of the first steps in buying a house is to go see a mortgage specialist to get pre-approved for a mortgage. Most REALTORS will ask if you are pre-approved for a mortgage. The mortgage specialist will look at your income and finances to determine how much you can afford. They will give you confirmation that you are pre-approved for a mortgage and a guaranteed interest rate for a specific period of time. A mortgage pre-approval will let you know how much you can afford so you know what price range you will be looking in.
5. Do I need to save up a down payment before I buy a house?
You will need to put down at least 5% of the purchase price of the house. This has to be your own money. When you put down less than 20% of the purchase price your mortgage will be a high ratio mortgage and you will be required to get mortgage insurance from Canada Mortgage and Housing (CMHC) or Genworth. If you are able to put down more than 20% you will not require mortgage insurance.
6. How much are legal fees?
A lawyer will charge between $1500 and $1800 to handle the transaction.
7. What other costs are associated with buying a house?
Land Transfer Tax is a tax paid to the government for the transfer of property from one person to another. The amount depends on the purchase price.
If you are a first time home buyer you will be exempt from the first $4000 of land transfer tax. Land Transfer tax is paid at the time of closing through your lawyer. Your lawyer will calculate the exact amount.
8. What expenses are associated with owning a house?
When you own a house you will have to pay mortgage payments, property taxes, utilities and home insurance on an ongoing monthly basis and maintenance as required. You will need to budget for other additional initial expenses including:
Appliances are they included with the purchase of the house, do you have your own or will you need to buy appliances?
Moving expenses. You could hire movers to do everything or you could rent a truck and ask some friends to help you. Either way you will have to pay for the move.
Window coverings such as curtains and blinds may be included with the purchase of the house or you may need to buy your own once you take possession of your new home.
Connection fees and deposit for setting up utilities. You will need gas, electricity, telephone, cable TV and internet set up for your new house. Some companies will have installation or hookup fees. You may also have to pay a deposit if you are a new customer.
9. Do I need to purchase Title Insurance?
I recommend that you purchase Title Insurance. It costs about $300 and protects you against disputes over property boundaries and mortgage fraud. Title insurance is purchased through your lawyer.
10. Do I have to pay the REALTOR a commission?
In almost all house buying transactions, the seller of the house pays the real estate commission. The buyer doesn’t have to pay any commission. The buyer can have the full services of a Realtor for no charge.
11. Do I have to sign a contract with the REALTOR?
It is not necessary to sign a Buyer Representation Agreement (BRA) to see a house with a REALTOR, but if you are going to use the Realtor to buy a property and want all their services it is best to sign a BRA. This way they will be working on your behalf and will cover all your concerns and ensure that the entire purchase goes smoothly in your favour.